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Randoms: Taxing the System


A cause for pause following a 147% sprint?


Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also Pop Tart.

The Fade Trade - 9:28 am

Minyans know I'm leaning short (initiated into Friday's hot popper) and plan to "trade around" that bias.

Notwithstanding my particular posture, the 'easy' trade today might well be the first fade (higher) before a truer tenor emerges for today's tape.

Good luck today.

Gate Sniffage! - 10:32 am

  • Respecting the process through the lens of discipline, I covered roughly half my short-side exposure into the opening slippage. Just trading and truth be told, my risk was a bit outsized given my late day Friday additions.

  • How did I know my positions were too big? I thought about them for the better part of the weekend. As my intention is to keep loose grips on the handlebars and trade to win (as opposed to trading "not to lose"), I'm now in a position to make sales higher and covers lower.

  • Five reasons for caution? Let's see... there are four here, and another one in the form of the counter-party derivative risk associated with a General Motors (GM) bankruptcy.

  • Green beans in the Red Sea include IBM (IBM), Amgen (AMGN), Wal-Mart (WMT) (reports this week), Campbell Soup (CPB) (off a favorable Barron's article) and, don't look now, the semis and Apple (AAPL) (which were the Debbie Downers last week).

  • I don't know if you get Palladia on your local cable station but it's quickly become one of my favorite places to vibe with live music (in HD, no less), around the clock. This weekend featured a particularly snazzy rendition of the Red Hot Chili Peppers in Milan.

  • Minyan Cheesehead Mike was discussing the tech stock move in 1999 and the current lift in financials and noted the (rather important) distinction that tech stocks didn't massively dilute themselves as they attempted to climb back up the slippery slope.

  • Sorry for the lag on the sniffage--the Cybergods, with an assist from Mercury Retrograde, ate my homework. Hence the lag, which I'm truly sorry for.

  • Good luck today, Minyans, and think positive. Profitability begins within.

Uncle John's Stand - 11:11 am

We sure have a lot to be Grateful for! The first fade was the easy trade (don't you worry anymore) but when life looks like easy street there is danger at your door. Think this through with me...

Now that we've seen the aforementioned lift higher out of the gate, the question becomes one of sustainability. There are two schools of thought here, which will walk through in kind.

  • Powered by "N's over S's," they keep going, setting the stage for Turnaround Tuesday.

  • They Peter out and slip lower, which "fits" with the 3:1 negative breadth and overbought conditions.

We can pick the direction or game the timing but we'll rarely nail both. That, in large part, is why I'm trading "in between" and covered roughly half my (admittedly outsized) short side exposure into the opening abyss. There is room to S&P 950 (and no guarantee they stop there) so while I'm maintaining a short bias, I'm "seeing all sides" as we continue to find our way.

I will say, as I vibed to "my brother" on Friday, the last 20 handles (into S&P 950) is hard money for the bulls and "a short-side opportunity in the context of defined risk" for the bears.

Where you stand is a function of where you sit so tread carefully and carry a big schtick.

As always, I hope this finds you well.

The Wax on Tax? - 12:22 pm

  • While I believe (am told) this is separate and disctinct from the "traders tax" that made the rounds a few months ago, the specter of adverse tax consequences may be the excuse Boo was looking for to build some side bets in the financials on the heals of the 147% rally (off the lows) in the banks.

  • Wells Fargo (WFC) and Citigroup (C) are the dry eyes in the financial complex thus far today.

  • Meanwhile, Coke (KO) and Pepsi (PEP) have flipped the upside switch in consumer non-durable land alongside Campbell Soup (CPB).

  • Through objective eyes, sector rotation--as opposed to monolithic 'one for all and all for one" movements--is on the margin constructive as it points to a more normalized trading environment.

  • Lemme get this out there and sniff out what, if anything, this potential trader tax is all about. As always, I hope this finds you sell. Pork chops and apple sauce, swell.


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Position in S&P, financials
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